Originally published in the March 30 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s executive branch plans to propose to Congress a five-year extension of the 0.38 percent CPMF (bank transactions tax), an action that would require a constitutional amendment.
Brazil’s executive branch plans to propose to Congress a five-year extension of the 0.38 percent CPMF (bank transactions tax), an action that would require a constitutional amendment. If the extension is approved, the tax will not expire on December 31, 2007, as currently scheduled, but will continue to apply through December 2012. According to sources close to the executive branch, there are no plans to change the CPMF rate.
A draft proposal has already been approved by Brazil’s Ministry of Planning and is now awaiting approval by the Ministry of Finance before submission to President Luiz Inácio Lula da Silva. If the president supports the constitutional amendment, the proposal then will be submitted to Congress. That sequence of events is expected to occur within the next few weeks.
Because of a constitutional rule that requires a tax law to be in place for at least 90 days before it can have an effect on taxpayers, the proposal must be approved by late September. Otherwise, the existing CPMF will expire, and no bank transactions tax can be levied until the 90-day period has elapsed. If the extension is not approved until December 1, for example, the government will have to wait until March 1, 2008, to start collecting the CPMF again.
CPMF is an important source of federal tax revenue. Estimates for 2007 indicate that CPMF revenue may reach BRL 36.2 billion (approximately US $17.5 billion), or 9.72 percent of total tax revenues collected by the Federal Revenue Department in 2006. Each month without CPMF collections represents a loss of tax revenue of BRL 3 billion, officials estimate.
David Roberto R. Soares da Silva